Commodity Price Analysis 13-05-2022:
- The Russian oil exports appear to be falling, but the US stock market has struggled with inflation and the Federal Reserve’s decision to increase interest rates to combat it.
- Today, Brent crude futures rose $3.97, or 3.7 percent, to $111.42, while US West Texas Intermediate (WTI) crude gained $4.38, or 4.1 percent, to $110.51.
- The June Nymex gas futures contract settled at $7.739/MMBtu, up 9.9 cents day-on-day.
- Corn futures are falling at midday on Friday, with futures down 5 to 11 14% for the day.
The price of oil continues its rollercoaster ride as conflicting signals led to a volatile Hi/Lo range of about $12 per barrel for both key grades of crude. The Russian oil exports appear to be falling, but the US stock market has struggled with inflation and the Federal Reserve’s decision to increase interest rates to combat it.
This week, WTI fell $10 a barrel from Friday’s $109.77 settlement in the first two trading days, mainly due to the EIA’s Short-term Energy Outlook (STEO), which lowered the 2022 global demand for oil and refined products by 100,000 barrels per day. In addition, travelers may have been discouraged from longer distances this summer due to high gas prices. As a result, the price of US crude fell below $100 per barrel on Tuesday for the first time in two weeks.
Today, Brent crude futures rose $3.97, or 3.7 percent, to $111.42, while US West Texas Intermediate (WTI) crude gained $4.38, or 4.1 percent, to $110.51.
Gasoline futures rose to a record high, boosting the gasoline crack spread – which measures refining profit margins – to its highest level since April 2020, when Brent settled in negative territory.
According to Refinitiv data going back to May 2021, the 3:2:1-crack spread for gasoline and diesel in the United States also reached a record.
Price volatility is due to concerns that an EU ban on Russian oil could tighten supplies, but also to fears that a resurgent pandemic or other factors could cut global demand.
On the heels of a mildly bullish storage report and forecasts for continued heat in the near-term weather, natural gas futures rallied for a third consecutive session on Thursday. The June Nymex gas futures contract settled at $7.739/MMBtu, up 9.9 cents day-on-day. The July contract gained 10.8 cents to $7.835.
Although physical prices were volatile last week, NGI’s Spot Gas National Average fell 11.0 cents to $7.195.
According to Bespoke Weather Services, total gas-weighted degree days are expected to be above average in the coming two weeks.
Gold is expected to close the week down around 4%, its worst weekly close since mid-June 2021. According to analysts, gold’s current price of around $1,800 an ounce could trigger a bigger selloff.
A further drop below $1,800 is very possible right now, more so than ever before this year. In a few weeks, we can go back above $1,900 even with elevated downside risk. After that, gold’s range should be widened due to increased volatility.
After a rally sparked by lower US and world production and ending stocks in the Wasde and industry analysts, Chicago corn futures declined for the first time in four days.
Corn futures are falling at midday on Friday, with futures down 5 to 11 14% for the day.
On Thursday, USDA’s WASDE showed some bull-friendly numbers. But traders are expecting a drier 7-day QPF, so planting progress should catch up with the lag. The ECB will see around an inch of rain over the next week with less than half an inch expected in the Western Corn Belt. USDA noted that the lag in planting progress contributed to the 177 BPA yield, below February’s weather-adjusted trend yield.